A trust is an estate planning tool used to transfer money or property from one person (the grantor) to another person or entity, called the beneficiary. A trustee manages the assets in the trust according to instructions set out in a trust document. The trustee can be the grantor, another individual or a firm, such as a bank or investment company. The trustee has a fiduciary duty to act in the best interests of the beneficiaries.
There are many benefits to using a trust. The primary benefit is that a trust avoids probate, which is the legal process of analyzing and distributing assets when someone dies without leaving clear instructions. This can save time, expense and keep family members’ private affairs out of public view. Trusts can also help to preserve and protect assets that may otherwise be vulnerable to loss or waste. For example, a trust can keep personal property, such as artwork, jewelry and prized collections, away from creditors and from other family members who might not be responsible with spending it.
In addition, a trust can be used to pay for living expenses and/or to provide education expenses for children or grandchildren. It can also be used to provide support for disabled loved ones, or even pets. A trust can also be useful in preserving a family business or protecting a home that is subject to a mortgage.
A good trustee will be knowledgeable about the law and finance. The trustee will also be able to understand and follow the terms of the trust document, which includes providing the beneficiaries with appropriate distributions at the right times. They will also be able to manage the trust investments and ensure that the property in the trust is protected. They will not mix trust assets with their own personal assets, nor receive improper benefits from the trust.
If the grantor’s wishes are not clear, a trustee should consult an attorney for guidance. A skilled lawyer can explain the options and implications to the grantor, helping them choose a trustworthy trustee who is capable of fulfilling their duties and responsibilities. The lawyer will also assist in retitling assets into the trust, which can take some time depending on how many assets are being transferred and how they are titled.
When the trustee is ready to distribute the trust assets, they will usually write the beneficiary a check or give them cash, and can transfer real estate by signing a new deed. However, the trustee should always be mindful of the terms in the trust document and make sure they are not imposing their own judgment or preferences on the beneficiaries.
The role of a trustee is a serious one, and anyone named in the trust should be familiar with the duties and responsibilities before agreeing to serve. Preparing a trust can be complicated, and some trustees can become overwhelmed. It is important to select a trustee who will be dedicated to the job and has the experience, skills and resources to manage the trust effectively.